Tax Deduction Checklist For Small Businesses
Who’s ready to read the 73,000 pages of tax codes?!! Anyone? Anyone? Bueller? Yeah, we didn’t think so. The tax codes are absurdly long and we know for certain that you’re not going to spend your time combing through each page to see if your tax deduction is listed there. We can tell you it isn’t because the tax codes are more of guidelines than a long enumerate list. Here at PayTech we understand small business tax deductions can be confusing, therefore, we’ve compiled a list for you. We must warn you though that it is important to keep accurate records as not every item listed below is deductible all of the time. For example, a business dinner with friends who are prospective clients can qualify for a 50% deduction if a substantial business conversation takes place, while a casual dinner with current clients may not be if no business conversation takes place. The key is to work with your CPA to get your ducks in a row. When you go on a trip, write down the destination, mileage, and persons with whom you are meeting. If you purchase new equipment, document the reason. This will help reduce your chance of audits while maximizing your deductions.
List of Possible Deductions for Taxes
Deductions Applicable to Most Businesses
The following is a list of possible deductions of which most small businesses can take advantage.
- Accounting fees
- Advertising
- Auto expenses – including rentals, if used for work purposes
- Business travel – important to keep good receipts
- Charitable deductions made for a business purpose
- Cleaning/janitorial services – This can include your home office. Let’s say your home office takes up 25% of the square footage of your home; you can deduct 25% of the home cleaning fee as a business expense.
- Computers and tech supplies
- Continuing education for yourself to maintain licensing and improve your skills.
- Credit card convenience fees
- Dining during business travel – 50% deductible.
- Dining catered in – IRS allows businesses to fully deduct occasional small snacks and meals that are purchased for the benefit of employees.
- Doughnuts and coffee purchased for an office meeting are a perfect example. Lunches and dinners brought in to facilitate working through lunch or working late also count.
- Freight or shipping costs
- Furniture or fixtures – For in home offices, the pieces must reside in the office at all times.
- Gifts for customers ($25 deduction limit for each)
- Health insurance
- Home office – must not be used for anything other than business. Home offices often spark a warning flag to the auditing department, so be sure to keep clear records pertaining to home office expenses.
- Internet hosting and services – part or all of the cost depending on who uses it.
- Investment advice and fees
- Legal fees
- License fees
- Losses due to theft
- MaterialsSmall Business Tax Deductions
- Moving
- Newspapers and magazines
- Office supplies and expenses
- Parking and tolls
- Postage
- Safe-deposit box
- Safe
- Software and online services
- Storage rental
- Subcontractors
- Taxes
- Telephone
- Utilities
- Website design
Small Business Tax Deductions that are Expanding
The following is a list of tax deductions that many businesses take advantage of as their business continues to grow.
- Board meetings: EX. food, off-site location rentals
- Consulting fees
- Conventions and trade shows
- Entertainment for customers and clients – 50% deductible
- Equipment
- Equipment repairs
- Exhibits for publicity – For example, freelancers showcasing their work might put on or participate in an exhibit, gallery showing, or similar event.
- Franchise fees – as a franchisor or franchisee. Or the costs associated with exploring the option of franchising.
- Management fees
- Maintenance
- Mortgage interest on business property
- Publicity
- Prizes for contests
- Real estate-related expenses
- Rebates on sales
- Rent
- Research and development
- Royalties
Deductions Applicable for Businesses with Employees
These tax deductions are generally applicable for small businesses that have employees.
- Commissions to outside partiesSmall Business Tax Deductions
- Education and training for employees
- Employee wages
- Family members’ wages
- Group insurance (if qualifying)
- Medical expenses (with plan)
- Payroll taxes for employees, including Social Security, Medicare taxes and unemployment taxes
- Pension plans
- Retirement plans
- Workers’ compensation insurance
Deductions You Should Ask Your Accountant About
These tax deductions can get a little tricky and tend to have varying rules for qualification. We recommend asking your tax professional about these deductions to see of which you can take advantage.
- Amortization
- Bad debts that you cannot collect
- Banking fees
- Building repairs and maintenance – harder to deduct for a home office unless the repairs happen directly in the office space itself.
- Business association membership dues – must be specific to your industry
- Collection Expenses
- Costs of goods sold
- Depreciation
- Discounts to customers – Can be a tricky one, co-work with a CPA to qualify.
- Interest
Work Opportunity Credit
This tax credit, which can range from $2,400 to $9,600, is available for each person hired from certain target groups that historically have faced barriers to employment. They include military veterans who meet certain unemployment, disability or financial aid criteria, ex-felons, certain people living in federally designated Rural Renewal Counties or Empowerment Zones, and people who have been receiving various forms of federal financial assistance.
In order to take full advantage of every tax credit and deduction available, you’ll want to work with our expert team at PayTech. Your personal tax professional will look over your accounts and help you maximize all possible deductions. He or she will also personally handle your account through the year to ensure your I’s are dotted and T’s crossed for tax season 2018. Call us or visit us online today.
